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One final question, cabinet secretary: what would you do to make Scotland more competitive in terms of tax in comparison with the rest of the UK?

Good morning. I welcome the acknowledgement of the serious fiscal situation that the Scottish Government faces. It was good to hear that from you.

In your statement to Parliament on the medium-term financial strategy, you said that you committed to the Scottish economy being on a sustainable trajectory by 2026 and you made no bones about the fact that tough decisions would have to be made. I want to ask about that. All the forecasters and the Scottish Government statistics predict considerable increases in health, social care and social security spending over the next five years. I think that I am right in saying that, for social security alone, there will be an increase from around £5.3 billion to £7.8 billion.

Those policy areas all tie in with your comments about addressing poverty and the needs of the most vulnerable. If that spending is going to be so high, where will you be able to make the tough decisions that will help the fiscal situation?

There will definitely have to be a new financial memorandum. I reiterate that four committees of Parliament are not happy with the current plan, which is why I asked the question.

Notwithstanding that, is it not the case that the overall tax revenues are nothing like what we need to be able to take in to address some of the funding gap? That is the problem, and today’s statistics about unemployment, employment and economic inactivity were pretty stark about the numbers of people who are not actually in work at all, which means a loss of potential revenue. Then we have the issue with north-east jobs, which are some of the better-paid ones with people paying slightly higher tax rates. That money is not coming to the Scottish Government, so there is a pretty serious situation where the tax revenue that the Scottish Government is getting just now is nothing like what is required to deliver extra money for its public expenditure.

You are quite right to say that you cannot comment on projected policies that the Scottish Government should employ, but I am interested in finding out whether, in all the analysis that you are doing and the data that you are using, you are aware of other countries or other attempts to try to reform public services in the way that you have described with regard to increasing efficiency, making use of technology or whatever. You have already given us three or four examples, but are there any other areas that, without projecting into Scottish Government policy, you think that we should be looking at?

So you are recommending that the structure of oversight of the health service change a bit to facilitate that. I realise that we were due to speak to other witnesses, too, but does that include the integration joint board structure? Would you recommend any changes on that front?

Thank you.

Thank you. That was helpful.

Obviously, there is a question to be asked about medium and longer-term planning for the economy; indeed, you cited that in your response to Michael Marra. The gap between Scottish Government projected expenditure and the tax take is a very serious issue, and I think that it focuses the committee’s attention on two questions. First, what is the scope for serious public sector reform that would help to address the problem? Secondly, how can we increase the tax take?

On the first of those issues, do you have suggestions for the most likely areas of public sector reform that could help with things, given the fact that there is almost certainly no scope to reduce spending on health, social security and social care? Indeed, as your own estimates have shown, spending on those areas is going to increase very substantially. What scope is there for public sector reform that could really help with that side of the equation?

The second aspect of my question is about tax revenues, which you have mentioned. There are ways to increase tax revenue by changing tax rates and thresholds and so on, but there is a question around the change to tax structures. A debate is going on down south just now about whether inheritance tax should be replaced, and we have had lots of debates up here about whether council tax should change, and so on.

I go back to the analysis, of which you are aware, around other countries that have changed their tax structures. Is that debate an urgent one to have here in order to address some of the concerns that we have about a weakening tax return?

Good morning. My questioning will focus on two areas. The first is about the frustration that I think we all feel about the different timings of the various forecasts that underpin strategies—whether it be those for the medium-term financial strategy or any other set of forecasts—and how the OBR and the SFC forecasts relate to the different timings in the budget cycle. That has an impact on the projections that can be made, given the data at that time. Is there scope to bring the timings of the forecasts slightly closer together so as to make things easier? I am sure that the OBR and the SFC would welcome that as well.